Worldwide information technology spending is expected to total $3.49 trillion in 2016, a decline of 0.5 percent, compared with 2015 spending of $3.5 trillion, according to estimates by Gartner Inc. Growth in software spending is expected to show the biggest growth in 2016, rising an estimated 4.2 percent over 2015.

Spending on IT services and data center technology is projected to increase an estimated 2.1 percent, the research firm predicts. At the other end of the spectrum, spending on devices is expected to decline 3.7 percent, while expenditures for communication services is expected to fall 2 percent.

"There is an undercurrent of economic uncertainty that is driving organizations to tighten their belts, and IT spending is one of the casualties," said John-David Lovelock, research vice president at Gartner.

"Concurrently, the need to invest in IT to support digital business is more urgent than ever,” Lovelock said. “Business leaders know that they need to become digital businesses or face irrelevance in a digital world. To make that happen, leaders are engaging in tough cost optimization efforts in some areas to fund digital business in others."

For example, the savings from legacy system optimization and enhancements are being redirected to fund digital initiatives, Lovelock said. “It's about doing more with the same funds,” he said.

Typically, less than 10 percent of organizations are in cost optimization or cost cutting mode, according to Gartner. But the need to spend on digital business initiatives in a time when revenue growth does not support runaway IT budgets is forcing more organizations to optimize as a first step.

The most evident results of optimization efforts are in the switches in spending between assets and services. "Most traditional IT now has a 'digital service twin'—license software has cloud software, servers have infrastructure-as-a-service, and cellular voice has VoLTE," Lovelock said. "Things that once had to be purchased as an asset can now be delivered as a service.”

Spending on data center systems is projected to reach $175 billion in 2016, a 2.1 percent increase from 2015, the research firm noted.

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